The Attraction of Developed Markets for Emerging Market Brands - Coursework Example

Running head: international marketing. International marketing Discuss the attraction of developed markets for emerging market brands and evaluatethe challenges they can face when targeting developed markets. Name: Course: Date: With greater access to information and media, both consumers and manufacturers are willing to explore new opportunities. Businesses that aspire to make use of the globalized world in order to make more profits and expand find it quite challenging to make an international entry and flourish. These challenges are intensified if businesses from emerging markets aim at entering developed markets; though, vice versa seems less complex at least from a market capturing perspective. Yet, the incredible diversity and huge potential offered by international markets can be largely profitable thereby not stopping businesses to try to venture into new markets despite immense challenges and multi-dimensional complexities. The present discourse focuses on understanding the need and challenges for business aspirants from emerging markets trying to enter the developed markets to make their presence or introduce new products, considering the examples of products from Lenovo and Tata. While marketing is concerned with the process of linking the product and customer, or introduced to each other through a variety of linked and independent activities, international marketing is not any different. The only difference is that international marketing involves products and customers across borders, and that this process is more complex as it involves a number of additional factors and processes. This complexity makes international marketing very difficult and not all businesses can successfully accomplish such a task. A few major factors to be considered for international marketing include market types, regulations, culture and national orientations, and costs. Furthermore, every process required for making an international presence is governed by more internal and external factors, which adds to the complexity of international marketing process (Hollensen, 2011). According to the American Marketing Association (AMA), international marketing may be defined as the multinational process of planning and executing the conception, pricing, promotion and distribution of ideal goods and services to create exchanges that satisfy individual and organisational objectives (Paul & Kapoor, 2012; p.4). In any international trade, multiple beneficiaries emerge, which again is a positive outcome for the society in general. From an economic perspective, different conceptualizations have been made to justify international marketing, all of which indicating benefits from multiple perspectives such as production, comparative advantage, absolute advantage, exchange rate trade and gain (Onkvisit & Shaw, 2008). These economic perspectives underpin the rationale for companies to make decisions related to international entry. Another major pushing factor for international entry is globalization, which has far-reaching consequences for both consumers and producers. Earlier, Levitt (1984) asserted that globalization, influenced by advancing information technology and media, has caused major convergence of customers wants and desires since 1970s; and that this is a major advantage to the businesses willing to exploit these opportunities. Levitt (1984) also identified that the a large part of general public welcomes multinational businesses and accepts multicultural products, as seen in the cases of Chinese foods, Italian pizzas and pastas, Music, Japanese cars etc. This defies cultural-preferences notion to some extent, which is not entirely true as orientation and biasness or self reference continue to pose challenges to international marketing (Keegan & Green, 2008). Nevertheless, acceptability of brands and products from emerging markets by the customers in developed markets is also threatened by challenges such as brand quality/culture perceptions, public relations (PR), worldwide word of mouth (WOM), and now the social media. Attributed to the positive and negative effects of globalization, businesses are forced to expand into unexplored territories for sustenance, growth, and to stay competitive. For the same reasons, brands from emerging markets, like the Indian multinational conglomerate Tata and the Chinese technology brand Lenovo, are striving to establish their businesses and introduce new products in the developed markets of the West amidst tough competition from their well-established and advanced western counterparts. As pointed out by the Chairman of Tata Group, Ratan Tata (2004), establishing internationally literally means that the company should be able to compete on a global platform while harnessing the global opportunities by developing global capabilities at individual company/product level and also at group level. Emphasizing the need for branding at global level, Tata (2004) justifies that their well-recognized brands in the fields of software and hotels actually help in reinforcing its presence at global level and to take newer products to unexplored markets. Here, Tata emphasizes the advantage of their existing brand perception that can be leveraged for new product introduction. Supportive of its brand image in global market, a recent survey from Brand Finance Global 500 shows that Tata is the only Indian company that improved its brand value from $18.16 billion in 2013 to $21.1 billion and brand rating from AAA- to AA+, moving to 34th position from 39th in 2013 (BS Reporter, 2014). Nevertheless, Tata’s efforts to introduce its automobiles, especially the cars, into developed markets are huge; this attempt is being confronted with complex and multiple challenges. The Chinese technology giant like Lenovo, founded in 1984 by Liu Chuanzhi, a relatively new entrant, has established its multinational presence in global market in a short span and sells almost all of its products in more than 150 countries worldwide (Gong, 2013). Gong (2013) explains that Lenovo is known for its business expansion strategies and product differentiation in the personal-use technology sphere. Lenovo had quickly acquired about 30% of domestic market share by leveraging its deep understanding of domestic markets. In the international markets, Lenovo’s strategy of acquiring IBM’s PC business using its own cost competencies not only helped in quickly understanding the international market’s requirements but also gained access to the international distributors’ at once. Eventually, Lenovo monetised its cost and distribution capabilities acquired from acquisitions to build R&D, manufacturing, marketing resources in China before starting to export its products worldwide and targeted emerging markets like India, Brazil Mexico besides opening larger offices in the US (Gong, 2013). This mode of entry proved to be highly beneficial in terms of earning ready access to distributors, ready management access, and reduced competition after acquiring IBM’s PC business. However, integration with the existing operations and management of IBM was a huge challenge due to the imminent differences in culture, management and negotiation styles, communication styles and customer expectations. Reports point out that Lenovo has clearly moved from an ethnocentric to a geocentric approach in every manner, which has facilitated its sustenance in the western markets amidst tough competition from smart phone and tablets markets, thereby attaining a global company status. Geocentric businesses that are transnational focus on global markets and make use of global supply chains (Keegan & Green, 2011); Lenovo has been fortunate to utilize IBM’s resources in the US, which further helped in standardization and localization of its products and is reported to have overtaken HP in its number of shipments (Yuan, 2013). Their geocentric approach and acquisition mode of entry into developed markets addressed mitigated risks of differences and opinions to a large extent. Another encouraging and supporting factor for Lenovo is its experience in China that has internet users more than the total population of the US or Europe compared to 80% of US users, as per Internet world stats data (n.d), which could have helped their planning and marketing, manufacturing operations and logistics in the new region. Increasing use of technology in the West certainly proved to be a lucrative market for this Chinese technology giant. Lenovo’s grand advertising strategy of sponsoring the Olympic Games and the Olympic Torch was a boost to its international profile and built an overall global brand (Davis, 2012). Tata’s presence in American and European markets is very old although their presence intensified with acquisitions that crossed $2.5 billion during 2000-2006, with latest acquisition by Tata Steel of Corus Steel in Europe. Evidences show that Tata has made about 21 acquisitions overseas amounting to about $12 billion (Kumar, 2011, p.408-409). After successful establishment of the Tata brand in the American software and IT fields, it aims to introduce its automobiles through Tata Nano, the current cheapest car in the world, in the US and European markets (Beckett & Choudhury, 2012). However, this car will come with many modifications to suit the needs of Western customers, such as free-way driving, crash-test and emission requirements etc, to be named as Pixel, as told by Mr Tata. The noteworthy point here is that Tata Nano as the cheapest car in India attained much hype that could not surpass their sales projections after the first year due to various reasons related to comfort, perception, performance etc; this outcome has been acknowledged by the company publicly as their inefficient advertising campaign and insufficient dealer networks (Beckett & Choudhury, 2012). These perceptions have certainly amounted to significant bad word of mouth for this product of pride by Tata. Despite their brand image, this bad word of mouth can be extremely damaging and can negatively affect international customers’ decisions about purchasing the product. Secondly, new product’s entry into international market will be appreciated only in case of lesser alternatives, as pointed by Buttle (1998); however, considering the features of Pixel, it is unlikely that there would be a huge variation between existing low-end cars and the Pixel, which will further intensify the challenges for Tata in the Western developed markets. Pixel might not justify its positioning strategy in the developed markets as expected due to the complex obligations it has to follow. Tata will have to focus on its advertising campaign by adopting celebrity endorsements from target markets. If they have expatriate marketing managers doing negotiation activities with distributors and dealers, negotiation styles and cultural differences be a hindrance to expected outcomes. For industrialists like the Tatas or large profitable businesses of Lenovo, challenges that surface in terms of price, advertising, distribution can be handled; however, what these big players need to be mindful of in the international markets is that of the regulations and governance concerning consumer protection, marketing and employment practices that are very different in the Western nations (Leelapanyalert, 2009). Other complexities that these international players should face include regulations concerning export and import such as licensing, tariffs, customs etc; quality parameters related to market standards, testing, certification; subsidies and investment barriers; and, trade restrictions. Onkvisit and Shaw (2008) assert that the major challenge for international marketers is that they have to constantly update and upgrade their strategies according to the constantly changing regulations concerning import/export business of host and target countries. Any lapses in any of these areas could negatively affect their prospects to thrive in foreign markets. Though Lenovo benefited in the PC market from IBM’s acquisition in the US, current major challenge is to sustain their smart phones’ and tablets’ business in the developed markets amidst competition from major players like Apple and Samsung. In this case, consumer perceptions attached to products from Apple and Lenovo vary significantly. Standardisation is a major criterion for Lenovo, which has to suit the Western customers’ needs, or even competitor products’ features. De Mooij (2009) explains that even in a homogenized youth culture that increasingly seek use of technology through smart phones and tablets, a local youth culture constantly exists that prefers self-referenced choices based on their need and understanding of the products. From a culture perspective, Kotler and Keller (2005) identified more aspects such as reference groups, family, roles, status involved in consumer behavior (Doole & Lowe, 2008). For instance, the culture that links self-esteem with self-enhancement or depiction of self-esteem with usage of valuable products will choose products that they place value on irrespective of the product dimensions. In the Western cultures, one’s image is linked to material symbols, which in the collectivistic cultures, like China, is not given any importance. This can explain the US and European consumers’ choices of esteemed products of Apple over others, which can be a drawback for Lenovo. This necessitates the international marketer to adopt a culturally congruent strategy with standardised promotion and competitive price besides similar distribution models thereby including an element of cultural empathy for a different product that serves the same group of customers and their similar needs (Brady, 2010). Finally, to conclude, it may be said that international marketing is a complicated process involving a number of factors to be considered for businesses to flourish, especially for businesses from emerging markets in the developed markets. In order for brands from emerging markets, such as Tata and Lenovo, to introduce new products or thrive in developed markets, efforts and challenges are no less than those required for new entrants. Some of the significant factors for consideration are pricing strategies, import/export regulations and subsidies, modes of entry, advertising etc. Cultural perspectives play an important role both for marketers and consumers in the way products are marketed and bought. Impactful advertising strategies that not only appeal to the target audiences but also enhance brand value will be required. Geocentric approach to businesses in international arena has been successful and also recommended. 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